Five-times-salary mortgage offer

mkpdavies · 01-11-2006, 08:32 AM

http://news.bbc.co.uk/2/hi/business/6104522.stm

Quote:

Abbey, Britain's second largest home loan provider, is offering borrowers five times their salary in order to help them get onto the property ladder.
The bank is making the offer available to individuals or couples with a 25% deposit for their house and an annual income of £50,000 or more.

This is why the housing market will keep on spiraling upwards (combined with unlimited immigration/demand).

People are sadling themselves with huge debts now, while the interest rates are nice and low. Sooner or later, they will spike up again and there is going to be some savage pain felt by this country.

harryaldridge · 01-11-2006, 09:37 AM

A few points:

1. There is a big shortage of housing in the UK. We are building about 150,000 per year compard to the 300,000 needed.

2. Housing is seen as a good investment because, even taking the slumps into account, over time housing always goes up.

3. Housing provides good assets because people always need somewhere to live and are more likely to ditch other assets like shares.

4. Allowing higher lending:salary ratios will just keep the prices moving on up. This will feed through to peoples ability to borrow and so prop up consumer spending, again!

5. It will provide a nice tax revenue increase for the government.

How to take some of the heat out the market:

1. Tax the capital gain on selling your proerty, not levy stamp duty on buying it. This would help first time buyers and be related to the value at sale not purchase, acting as an automatic stabaliser if house prices slumped. It would take inflation into account and increase tax on property (a good thing to tax as related to value/economic rent). It would tax unearned income unlike stamp duty which is basically a sales tax.

Currently the government estimates it loses £13bn in CGT by exempting the main residence. It would therefore be very possible to move towards replacing stamp duty with a CGT.

eublues · 01-11-2006, 09:45 AM

Yes - CGT on selling your main residence will come in as EU-wide policy.

So too will being charged a proportion of the value of the house each year.

Expect other local taxes to be charged as well.

mkpdavies · 01-11-2006, 09:48 AM

I don't think you should have to pay a bean in tax for your home.

Investment properties income, maybe, but not your main home.

The idea of taxtion on your shelter repulses me.

SGK · 01-11-2006, 10:31 AM

Quote:

Originally Posted by harryaldridge

Currently the government estimates it loses £13bn in CGT by exempting the main residence.

The government does not 'lose' money if it is not taxing something. This is akin to the EU definition of subsidy which, I believe, means something that is not taxed. Very scary.

House prices cannot rise for ever, despite what a lot of people think. Nor can wages. People have to have somewhere to live, but at the moment a lot of people are giving up their lives for a house. Something will have to give eventually.

mkpdavies · 01-11-2006, 10:39 AM

People are slowly being placed right back into serfdom. They are taking on debts that they can never realistically pay off, if the rates go up even by a small amount. We could see one nasty bust, where people are kicked out of their homes, unable to service their debts. Then the house prices will crash and many more people will be left in massive negative equity.

Seriously, I can see this turning nasty. Combine that with major unemployment, with no chance of a job and the immigrants taking the blame and the country could spiral out of control.

As planned as far as I'm concerned.

harryaldridge · 01-11-2006, 10:57 AM

Quote:

Originally Posted by SGK

Quote:

Originally Posted by harryaldridge

Currently the government estimates it loses £13bn in CGT by exempting the main residence.

The government does not 'lose' money if it is not taxing something. This is akin to the EU definition of subsidy which, I believe, means something that is not taxed. Very scary.

I totally agree. I despise the way they cost the "revenue lost" as if it is their money. It is NOT their money it is MY money and the tax i pay is "income lost".

My point was simply that it is better to tax an unearned rise in value than tax people for buying a house with stamp duty. I think council tax should be abolished because it is an unfair tax on people shelter as pointed out by Matt.

mkpdavies · 01-11-2006, 11:05 AM

Council tax is supposed to be a bit more than that though isn't it. It's supposed to pay for local services more than anything.

Rubbish collection etc.

Moving Target · 01-11-2006, 08:15 PM

Quote:

Originally Posted by mkpdavies

People are slowly being placed right back into serfdom. They are taking on debts that they can never realistically pay off, if the rates go up even by a small amount. We could see one nasty bust, where people are kicked out of their homes, unable to service their debts. Then the house prices will crash and many more people will be left in massive negative equity.

Seriously, I can see this turning nasty. Combine that with major unemployment, with no chance of a job and the immigrants taking the blame and the country could spiral out of control.

As planned as far as I'm concerned.

Absolutely spot on - I couldn't agree more.

Could you ever imagine the interest rates up at 16% again? Even with rates at half of that level the Government would be out on its ear.

Aardvark · 02-11-2006, 06:45 PM

I could imagine that sadly. People are fiddling as Rome burns so to speak. Italy is out of the news at the moment, but it cannot stay in the Euro much longer. Spain is iffy as well.

If Italy has to leave the Euro the house of cards will tumble and the ECB will be forced to hike interest rates to keep the monetary union together. This will force either ourselves or the Americans (depends who blinks first) to up rates as a knee jerk reaction. The ECB could end up doing a Norman Lamont and taking everyone down together. If the ECB goes to 6 or 7 per cent we'll be up at 8 in no time. Within 3 months all of those on 5 times multiples will have defaulted and repossessions wil commence in earnest. House prices will plummet since there will be no buyers left. the 'buy to let' people will have to start ditching properties they cannot afford or increase rents to lunatic levels which will put all of the EU migrants onto the streets.

If Italy remains in the Euro then the ECB will have to put up interest rates to prop up Prodi's government. I was working with an Italian earlier this year (during the World Cup!) and she adopted the Italy will always survive attitude to economics. She did, however, point out that Turin and Milan were in economic meltdown. Given that these are the 2 cities upon which the whole of Italy relies for prosperity, that is a bad thing. If the ECB blinks soon, as it might have to, the above scenario will take place.

I could be wrong. Perhaps the countries who are net contributors to the EU will up their taxes to bail out Italy. :roll:

01-11-2006, 09:48 AM	#4 (permalink)
mkpdavies Uber Member Join Date: Sep 2004 Location: Woking Posts: 30,820	I don't think you should have to pay a bean in tax for your home. Investment properties income, maybe, but not your main home. The idea of taxtion on your shelter repulses me. __________________ http://brits4ronpaul.blogspot.com/ http://wokinglibertarians.blogspot.com/ http://lpuk.org My ignore list Labour, Blue Labour, Lib Dems

01-11-2006, 10:39 AM	#6 (permalink)
mkpdavies Uber Member Join Date: Sep 2004 Location: Woking Posts: 30,820	People are slowly being placed right back into serfdom. They are taking on debts that they can never realistically pay off, if the rates go up even by a small amount. We could see one nasty bust, where people are kicked out of their homes, unable to service their debts. Then the house prices will crash and many more people will be left in massive negative equity. Seriously, I can see this turning nasty. Combine that with major unemployment, with no chance of a job and the immigrants taking the blame and the country could spiral out of control. As planned as far as I'm concerned. __________________ http://brits4ronpaul.blogspot.com/ http://wokinglibertarians.blogspot.com/ http://lpuk.org My ignore list Labour, Blue Labour, Lib Dems

01-11-2006, 11:05 AM	#8 (permalink)
mkpdavies Uber Member Join Date: Sep 2004 Location: Woking Posts: 30,820	Council tax is supposed to be a bit more than that though isn't it. It's supposed to pay for local services more than anything. Rubbish collection etc. __________________ http://brits4ronpaul.blogspot.com/ http://wokinglibertarians.blogspot.com/ http://lpuk.org My ignore list Labour, Blue Labour, Lib Dems

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01-11-2006, 09:37 AM	#2 (permalink)
harryaldridge Senior Member Join Date: Oct 2005 Location: West Sussex Posts: 1,912	A few points: 1. There is a big shortage of housing in the UK. We are building about 150,000 per year compard to the 300,000 needed. 2. Housing is seen as a good investment because, even taking the slumps into account, over time housing always goes up. 3. Housing provides good assets because people always need somewhere to live and are more likely to ditch other assets like shares. 4. Allowing higher lending:salary ratios will just keep the prices moving on up. This will feed through to peoples ability to borrow and so prop up consumer spending, again! 5. It will provide a nice tax revenue increase for the government. How to take some of the heat out the market: 1. Tax the capital gain on selling your proerty, not levy stamp duty on buying it. This would help first time buyers and be related to the value at sale not purchase, acting as an automatic stabaliser if house prices slumped. It would take inflation into account and increase tax on property (a good thing to tax as related to value/economic rent). It would tax unearned income unlike stamp duty which is basically a sales tax. Currently the government estimates it loses £13bn in CGT by exempting the main residence. It would therefore be very possible to move towards replacing stamp duty with a CGT.

01-11-2006, 09:45 AM	#3 (permalink)
eublues Uber Member Join Date: Nov 2004 Posts: 3,100	Yes - CGT on selling your main residence will come in as EU-wide policy. So too will being charged a proportion of the value of the house each year. Expect other local taxes to be charged as well.

02-11-2006, 06:45 PM	#10 (permalink)
Aardvark Moderator Join Date: Dec 2004 Location: Oxonia Posts: 3,928	I could imagine that sadly. People are fiddling as Rome burns so to speak. Italy is out of the news at the moment, but it cannot stay in the Euro much longer. Spain is iffy as well. If Italy has to leave the Euro the house of cards will tumble and the ECB will be forced to hike interest rates to keep the monetary union together. This will force either ourselves or the Americans (depends who blinks first) to up rates as a knee jerk reaction. The ECB could end up doing a Norman Lamont and taking everyone down together. If the ECB goes to 6 or 7 per cent we'll be up at 8 in no time. Within 3 months all of those on 5 times multiples will have defaulted and repossessions wil commence in earnest. House prices will plummet since there will be no buyers left. the 'buy to let' people will have to start ditching properties they cannot afford or increase rents to lunatic levels which will put all of the EU migrants onto the streets. If Italy remains in the Euro then the ECB will have to put up interest rates to prop up Prodi's government. I was working with an Italian earlier this year (during the World Cup!) and she adopted the Italy will always survive attitude to economics. She did, however, point out that Turin and Milan were in economic meltdown. Given that these are the 2 cities upon which the whole of Italy relies for prosperity, that is a bad thing. If the ECB blinks soon, as it might have to, the above scenario will take place. I could be wrong. Perhaps the countries who are net contributors to the EU will up their taxes to bail out Italy. :roll: